Patent Monopolies Lead to Enormous Economic Waste

It would have been to include the view of an economist in this article that reports on how China and India are now able to produce low-cost versions of bio-tech cancer drugs. These drugs sell now for several thousand dollars per dose as a result of government granted patent monopolies.

Patent monopolies lead to enormous market distortions in the same way as other barriers to trade. However, the impact of patents is much larger since they have a much bigger effect on prices. It is rare that tariffs raise the price of goods by more than 20-30 percent. By contrast, patents often raise the price of protected drugs by several thousand percent.

The huge profits created by patent rents are the cause of kickbacks to doctors, misleading information on the safety and effectiveness of drugs, and government corruption that extends the length and scope of patent rents. These distortions lower the quality of health care and raise its cost. There are far more efficient mechanisms for supporting medical research.

This article also errs in asserting that countries can only issue compulsory licenses for drugs in cases of emergencies. The terms of the WTO allow for compulsory licensing under fairly general conditions.